Cyprus Seeks to Alleviate Pain from Deposit Raid

(NICOSIA, Cyprus) — Cypriot government officials sought Tuesday to alleviate the pain on small savers from a plan to raid bank deposits that has caused outrage in the country and sent jitters through European financial markets. Hours ahead of an expected vote in the country’s 56-member Parliament on the seizure of a percentage of deposits, officials sought to limit the impact on small savers and even hinted that the country was looking to limit the amount it is to raise from the measure’s imposition. A new draft bill discussed in Parliament’s finance committee proposed to spare all deposits below (EURO)20,000 ($25,900) from a levy. Those between (EURO)20,000 and (EURO)100,000 would still have a 6.75 percent charge imposed, and those above (EURO)100,000 would be hit for 9.9 percent, in line with the original plan put forward at the weekend. A vote in favor of the bank account confiscation is needed if Cyprus is to get (EURO)10 billion in rescue loans from its euro partners and the International Monetary Fund. The seizure of deposits is meant to raise (EURO)5.8 billion, which is part of the country’s rescue. If the vote fails to get through Parliament, Cyprus faces potential bankruptcy and a possible from the euro, which could reignite concerns in financial markets over the future of the single currency. Although Cyprus is the smallest eurozone country to be bailed out, its planned rescue has sent shockwaves through the single currency area as it was the first time European authorities have targeted people’s bank accounts. Other bailed out countries such as Greece, Ireland and Portugal have raised funds through imposing new taxes. Proponents of the Cypriot account levy argue that this way gets foreigners who have taken advantage of Cyprus’s low-tax regime to share the cost of the bailout of the country’s banks, which have been hit hard by their over-exposure to bad Greek debt. About a third of all deposits in Cypriot banks are believed to be held by Russians. As lawmakers wrangled, Finance Minister Michalis Sarris was to fly to Moscow

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